Legal Entity ID
The financial industry is in the midst of creating an ISO standard Legal Entity Identification (LEI) code to uniquely identify all business and legal entities.
The LEI is needed by regulators and market authorities to evaluate risk, facilitate linkages and better manage systemic relationships. There is broad support for the LEI among financial institutions. These firms (throughout the global financial industry) need this identifier for both regulatory reporting and to automate business processes. The proposed ISO standard is a 12 character, alpha-numeric code that will contain no embedded intelligence. It is a baseline identifier that provides a foundation for many applications from risk analysis → to automation of business processes → to better management → to improved client service.
In addition to the identifier, the LEI process must incorporate a mechanism to verify all information required to uniquely identify legal entities; manage assignment and registration of the identifier; maintain its integrity against corporate actions; and ensure that it is made available to industry participants and the public when needed.
The Financial Stability Board has created a mechanism to develop and implement the Legal Entity Identification standard. The FSB process provides a structure for coordination among disparate regulatory regimes as well as a means for cooperation among industry, market authorities, trade associations and standards bodies.
The most recent meeting (October 15-16) focused on reconciliation of the structure of the identifier, the governance process for the Central Operating Unit, the alignment of the CFTC Interim Counterparty Identifier (CICI) with the LEI standard, the criteria to ensure data quality, and the architectural model for technical federation. The FSB regulatory expert group is preparing its governance recommendation for the G-20 (expected to be finalized prior to the March 2013 deadline). The critical issues related to the reporting of ownership and hierarchical relationships are still under review.
Commodity Futures Trading Commission (CFTC)
The CFTC is incorporating the LEI into their final rulemaking process for OTC derivatives transparency. The CFTC’s regulatory deadline requirements are slightly ahead of the FSB/G-20 process. As a result the CFTC is considering an interim solution to bridge the gap between their regulatory deadlines and the G-20 process. The interim solution is known at the CFTC Interim Counterparty Identifier (CICI). The CFTC fully supports the LEI objective and is an active participant in the global standards process. Their goal is to ensure that the CICI and the LEI are aligned – but they must be prepared for the remote possibility that the global process will not be implemented.
Role of the EDM Council
The EDM Council has been part of the LEI debate since its inception. We are members of the Steering Committee that created the industry’s recommendation. We are members of the Financial Stability Board’s Industry Advisory Panel and members of the CFTC’s Subcommittee on Data Standardization. The Council is an active member and holds a voting seat in both ISO and ANSI.